Back in the day I fashioned myself as an amateur heavyweight boxer. Bad move. I was only training a couple of evenings a week and I was terrible! As long as I could get a guy to the ropes and hold him there I was OK. Running around the ring was not my strength.

Boxing, just like ballet only the dancers hit each other! – Jack Handy

Next, I went on to train in mixed martial arts. Eureka. I was a better MMA fighter than boxer. But, age and only two nights a week once again caught up with me. I learned quickly what it means to “tap out” and how much better that felt.

Why do I share this story, and prove how crazy I can be and have been? Well, one thing about sports of any type, but especially the “ring sports,” there are a million analogies with each of us as business owners. A while back, after my really lousy health diagnoses, I realized that life, health and business often seem like a series of knockouts. After each we would drag ourselves off the mat and stand up ready to try again. We only lose the last time when we won’t get back up!

Incidentally, this lesson is also well understood by every auto racer on earth. Also back in the day, I raced sportsman and later late-model short track cars. Other cars, the wall, mechanical issues and I were not strangers. Every week it seems it was hours in the shop fixing what broke in the last race. My so-called racing career ended with my engagement to be married (ain’t it always the way), but over the years I saw many a promising racer walk away a last time and not get back up. They lost for good!

Life is like a boxing match. Defeat is declared not when you fall but when you refuse to stand again.  – Kristen Ashley, The Will

Over the next few months we’re going to look at areas we all face as business owners that seem to repeatedly take us to the mat. We’ll look at ways we can stand back up and fight another day. Along the way we’ll be considering proven strategies and ideas from a host of industries. For this series we’ll also get to review research across a variety of disciplines. Your investment is a few minutes each month but I pray your return is many fold. Oh, and if you have a humorous or serious anecdote about your own sport or life experiences, pass them along.

This month we will look at your profit-and-loss statement. Seemed if ever there was a shot below the belt that took us down, it existed in this one simple page. After all, it is a black and white statement of our success or failure.

Last month’s article was unapologetic regarding the need for all of us to pay techs in such a way as to recognize their investment in education, training and tools. The people in our shops are as much professionals and craftspeople as anyone else. That, or they’ll be obsolete in the not-too-distant future. Consider this chart(see blue chart):

Now consider for a moment that all of these professions require just about the same amount of training, education and a large investment in tools. Leaves little doubt as to why we are not always attracting the most talented people or have a hard time retaining them. Moreover, all of these alternative careers tend to offer some level of health insurance, retirement, uniforms, ongoing training, and more.

I don't pay good wages because I have a lot of money; I have a lot of money because I pay good wages.  – Robert Bosch

Speaking of health insurance, the average premium according to the Kaiser Institute is $17,615 a year for a family. Of this, the average employee pays some 31% of the premium. That means your portion is a whopping $12,154 a year! That’s equal to over a third of the average pay. And, it’s not news the cost is increasing a bunch every year.

How about parts and supplies. We have had nearly 10 years of tepid inflation. Here’s what that looks like(see red chart):

After interviewing a host of knowledgeable people and looking at all of the “pro” predictions, it appears 2018 will range somewhere between 2.5% and 3.0%. Looking at the value of a dollar starting in 2007, it is now worth about $.78.

Okay, I think that is enough body slams. Just think, even through all of this you have pulled yourself up, dusted yourself off and kept on going. And you’re successful if you are reading this article today. But let’s take a look at what it means to be even more successful, enjoy a better P&L report, less stress and more free time, along with a higher income.

We’ll make assumptions. You are close to the average hourly wage in your shop, you offer insurance for a family at the price above, with the average contribution by the employee and your parts and supplies go up about the same as inflation. Oh, and we’ll assume a 5% health insurance premium increase for 2018 and that you want to make 2018 the year you begin working toward paying an hourly rate closer to on par with the welder (higher next year).

You could just go make these changes. But just think about how much more precarious your P&L will look. Bankers will charge you more interest if they loan you money at all. Your accountant will make funny faces at you. You will, simply, put a lot less cash in your pocket.

Instead, assume you put a calculator to all of this. One more factor we need to add is your hourly labor rate, which is about $88, according to a number of surveys. But let’s assume you are in a metro area and more aggressive and move the average to $100. After clearing the smoke from my calculator, given all of the assumptions above, adjusting the health insurance increase to about a third of wages, you will need to raise your hourly rate by approximately 8% this year to BREAK EVEN with last year, much less make more. Oh, we assumed the inflationary factor at 50% of total since about half your sales are parts and supplies.

You could reduce this figure a bit by cutting costs, better control of inventory, increasing margins on part sales or a host of other things we’ll discuss in the future. But seems logical to see that as your pay increase.

We’re already a third of the way through 2018. If you haven’t made labor rate adjustments yet this year, then you need to raise your labor about 12% tomorrow to make up for lost time. But I think even now I can hear the raised voices that this just isn’t possible without losing customers. I would argue that a reasonable plan to get started now will help. I would also argue that losing a good tech may very well cost you customers too. The old chicken and egg thing.

You’ve probably heard Benjamin Franklin’s famous quote, “Nothing can be said to be certain, except death and taxes.” Well, you can add another certainty to that short list: prices will always go up. Business owners know it, but luckily most consumers expect it as well. So you shouldn’t worry too much about losing customers if you raise your prices. Of course, if you’re in a competitive industry, you’ll likely have to work a little harder to keep your customers. Source: QuickBooks Web

Here’s an option. Consider raising your labor rate once every four months. Say 4% now ($4 on the average hourly rate above), 4% in four months and 4% in December. It is true this won’t make up the space needed, but along with cost cutting and margin strategies we’ll be discussing later, it will take a bite out of the problem for sure.

Well, likely this has been a bit of a thrashing this month. It kind of goes back to the beginning of the year. I made a commitment to myself (guess I should have let Jim Wilder know too) that this year we will peel back the paint layers and just lay it out there. It all goes back to my core belief that we are in a Service Revolution as much as we were in an Industrial Revolution during the 1700 to 1800s. We already see the signs with what’s happened with the Internet. In the not too distant future we are likely to see more alternative power in the vehicles, increasing telematics, interrelated system modules, and very likely some level of autonomous operation.

The level of tech, shop technology and shop investment will increase exponentially as compared to the past. Call me an alarmist, but I truly believe we MUST begin openly and honestly considering where we are as an industry, together and as one, and where we’re going. There will be wildly successful independent shops in the future, no doubt about it. I am committed to making sure every single reader of this great publication enjoys a future that’s bright and knows they can withstand the punches sure to come.

Finally, a huge thank-you to many who support and inspire me – YOU! The readers and the crew at Undercar Digest/MD Publications. And to all who have been in my corner through all of these very eventful years. You have all pushed me to grow and achieve. I have also committed to raising my own game and providing more content and more information that’s usable and actionable than ever before in my 20+ years writing. Please join me.

Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. – Mark Twain